Homework Answers
| Option 1 | Option 2 | |
| Break even point in units = Fixed costs/(Selling price per unit - variable cost per unit) | 30 | 0 |
| 2.Level of sales for same operating income = Difference in Fixed costs/Difference in contribution Margin | ||
| =8400/(140) | ||
| 60 | units | |
| a.Option 1 will be preferred for sales above 60 units | ||
| b.Option 2 will be preferred for sales up to 60 units | ||
| 3.Degree of operating leverage = Contribution Margion/Net operating income | ||
| Option 1 = (280*65)/(280*65-8400) = 1.8571 | ||
| Option 2 = (700-420-140)*65/(700-420-140)*65 = 1 | ||
| 4.Operating income will change by a higher % with change in sales under option 1 |
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Comfy Carpets Inc., is considering three possible countries for
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All area rugs are to be sold to retail outlets in the United
States for
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per unit. These retail outlets add their own markup when selling
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rug) differ in the three countries.
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and
SingaporeSingapore.
All area rugs are to be sold to retail outlets in the United
States for
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to final customers. Fixed costs and variable cost per unit (area
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